How to Not Get Stiffed – Thoughts on Deposits for Freelancers

This short post will take you on a brief trip to the exciting world of deposits for freelancers, aka requiring down payments, aka not being business stupid because you’re better than that.

Avoid awkward late- or non-payment scenarios.

The best way to ruin a relationship with a client is to turn up the heat on the subject of money. You need it. They may even owe it. But when their own cash flow situation is unreliable, they drag their feet.

Photo Credit: 401(K) 2012 via Flickr

They’ve got you by the Benjamins, and what can you do about it? Send a sterner email? Threaten to never work with them again? Drag them into court?

Unless you’re litigious to a fault, your hands are tied. You have no other option than to wait for them to FINALLY process your invoice, and by that time you have peed in the pool. It’s clear to both parties that you’ll be parting ways.

“Good riddance,” you think as you renew the search for more clients, more projects, more dollars.

Oh no! You lost a client.

Ask any freelancer or consultant the most wearisome thing in business, and he will say, “Keeping my pipeline full.” You had a client. Now you don’t have a client. And getting a new one will take time.

So I’m hoping to illustrate the domino effect of wonky billing: You haven’t figured out deposits. You end up running out of money. You either starve it out or exert pressure on clients to pay up. You alienate clients in the process. Affections cool, and now you’re back at the beginning.

There’s a better way to improve your cash flow and to keep from losing clients unnecessarily through your own lack of process. It’s pretty simple in practice.

Require a non-refundable deposit.

Require a non-refundable deposit of 33% of the project total for larger projects and 50% for smaller projects.

Require 100% up-front payment from new clients.

For tighter timelines, require 100% payment up-front. Some clients will fight you on this, and you can respond one of two ways:“That’s no problem. I’m willing to make an exception for you. We can do 50% instead.” Propose that you wait and kickstart your relationship with a more propitious project.

Hi so-and-so,

We run a tight production schedule, so out of fairness to existing clients and their projects, we don’t add new projects to the queue until those clients have paid for their place in line, so to speak. Sometimes on larger, $10K+ projects we’ll do a 50% deposit. This pay-to-play approach works well for us.

If you all can’t turn around an invoice in a day or two, I totally understand. Perhaps we’ll have another chance to work together in the future!

Thanks,

[your name]

The nice thing about the second approach is that you won’t necessarily lose the project. More often than note, the client will agree to pay 100% up front. And you will have just stuck a feather in your badass cap.

People’s respect follows their money. The situation described above just happened to me, and you’ll discover like I did that being firm, being a little grumpy about boundaries, will help to train your clients to respect you. Stand your ground with money stuff, and they will push back less on EVERYTHING.

Require payment with a credit card from new clients.

Accept PayPal and credit card payments online, and make it clear in writing that you prefer for the deposit payment to be paid with a credit card.

That way, both parties aren’t waiting for a check to show up so that the project can commence.

Believe me, this can get awkward: “Has the check shown up yet?” “No, not yet, which means I still won’t work on your project.”

Require payment before commencing the project.

Don’t add a project to your production queue until the client pays the deposit invoice. I alluded to this in the email template above: Out of fairness to your existing clients and their projects, don’t add new projects to the queue until the deposit payment has shown up.

Those clients must wait in line like everyone else. They pay to play.

Whether or not they know it, your new clients want you to respect your existing clients. They want you to establish and honor boundaries because that de-risks the relationship for everyone.

“Oh, you’re not rushing to help me because you need to honor prior obligations? Well, I guess that means that once I’m in line, no one will be able to jump in front of me. That’s good.”

Require payment every two weeks.

As soon as the work you have put into the project passes the deposit invoice’s 33% or 50% mark, track your time carefully and start billing your hours every two weeks. You can read more about the benefits of twice-monthly invoicing here: “6 Invoicing Tips to Help Freelancers Get Paid Faster.”

When you quote flat, per-project fees, be sure to designate future billing dates and amounts in your client service agreement. For example, let’s say you invoiced 50% of the project total for the deposit. Send another invoice 30 days later for 25%, and the final invoice for 25% 60 days later.

I keep sending invoices even if the project isn’t close to finished. Why? Past clients have tabled projects or canceled them altogether, and their decisions represented the loss of critical revenues I was counting on.

Epilogue

“I’ve advised dozens of freelancers to charge 100% up front. Many struggle to actually do it, especially when clients push back. So last year, I changed the advice I give: Rephrase the ‘100% up front’ to something more palatable. You still achieve the same objective—charging 100% up front—but from a different angle. For example, you might say something like this: ‘We charge for time up front. Our minimum engagement is $5,000.’ Clients tend to say yes to that 1000% faster. Of course, they are still paying 100% up front. If they use up that $5,000, then you will bill them again. But it *feels* different because you changed the phrasing. Slightly different word choice can dramatically affect the relationship from Day 1.”

Do you want to build a profitable business you love?

Duh. Pony up that email address, and you can learn from my failures. You can laugh at my mistakes. You can envy my success at croquet, slow running, and modest bank accounts. Let’s make good money and leave the world better than we found it.

No-nonsense business advice for content writers and freelancers. Served warm with a side of dad jokes.

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